Liar.
No one but a liar would claim that having a son accept kickbacks was at all legal.
The law is clear.
www.law.cornell.edu
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§ 1.162-18 Illegal bribes and kickbacks.
(a) Illegal payments to government officials or employees -
(1) In general. No deduction shall be
allowed under section 162(a) for any
amount paid or incurred, directly or indirectly, to an official or
employee of any government, or of any
agency or other instrumentality of any government, if -
(i) In the case of a
payment made to an official or
employee of a government other than a
foreign government described in subparagraph (3)
(ii) or
(iii) of this paragraph, the
payment constitutes an illegal bribe or kickback, or
(ii) In the case of a
payment made to an official or
employee of a
foreign government described in subparagraph (3)
(ii) or
(iii) of this paragraph, the making of the
payment would be unlawful under the laws of the
United States (if such laws were applicable to the
payment and to the official or
employee at the time the expenses were paid or incurred).
No deduction shall be
allowed for an accrued expense if the eventual
payment thereof would fall within the prohibition of this section. The place where the expenses are paid or incurred is immaterial. For
purposes of subdivision
(ii) of this subparagraph, lawfulness, or unlawfulness of the
payment under the laws of the
foreign country is immaterial.
(2) Indirect payment. For
purposes of this paragraph, an indirect
payment to an individual shall include any
payment which inures to his
benefit or promotes his interests, regardless of the medium in which the
payment is made and regardless of the identity of the immediate recipient or
payor. Thus, for
example,
payment made to an agent, relative, or independent contractor of an official or
employee, or even directly into the general treasury of a
foreign country of which the
beneficiary is an official or
employee, may be treated as an indirect
payment to the official or
employee, if in fact such
payment inures or will inure to his
benefit or promotes or will promote his financial or other interests. A
payment made by an agent or independent contractor of the
taxpayer which
benefits the
taxpayer shall be treated as an indirect
payment by the
taxpayer to the official or
employee.
(3) Official or employee of a government. Any individual officially connected with -
(i) The Government of the
United States, a
State, a territory or possession of the
United States, the District of Columbia, or the Commonwealth of Puerto
Rico,
(ii) The government of a
foreign country, or
(iii) A political subdivision of, or a
corporation or other
entity serving as an
agency or instrumentality of, any of the above,
in whatever capacity, whether on a permanent or temporary basis, and whether or not serving for
compensation, shall be included within the term “official or
employee of a government”, regardless of the place of residence or post of duty of such individual. An independent contractor would not ordinarily be considered to be an official or
employee. For
purposes of section 162(c) and this paragraph, the term “foreign country” shall include any foreign nation, whether or not such nation has been accorded diplomatic recognition by the
United States.
Individuals who purport to act on behalf of or as the government of a foreign nation, or an
agency or instrumentality thereof, shall be treated under this section as officials or
employees of a
foreign government, whether or not such
individuals in fact
control such foreign nation,
agency, or instrumentality, and whether or not such
individuals are accorded diplomatic recognition. Accordingly, a
group in rebellion against an established government shall be treated as officials or
employees of a
foreign government, as shall officials or
employees of the government against which the
group is in rebellion.
(4) Laws of the United States. The term “laws of the United States”, to which reference is made in
paragraph (a)(1)(ii) of this section, shall be deemed to include only Federal statutes, including
State laws which are assimilated into Federal law by Federal statute, and legislative and interpretative regulations thereunder. The term shall also be limited to statutes which prohibit some act or acts, for the violation of which there is a civil or criminal
penalty.
(5) Burden of proof. In any proceeding involving the
issue of whether, for
purposes of section 162(c)(1), a
payment made to a government official or
employee constitutes an illegal bribe or kickback (or would be unlawful under the laws of the United States) the burden of proof in respect of such
issue shall be upon the Commissioner to the same extent as he bears the burden of proof in civil fraud cases under section 7454 (i.e., he must prove the illegality of the
payment by clear and convincing evidence).
(6) Example. The
application of this paragraph may be illustrated by the following example:
Example.
X Corp. is in the business of selling hospital equipment in State Y. During 1970, X Corp. employed A who at the time was employed full time by State Y as Superintendent of Hospitals. The purpose of A's employment by X Corp. was to procure for it an improper advantage over other concerns in the making of sales to hospitals in respect of which A, as Superintendent, had authority. X Corp. paid A $5,000 during 1970. The making of this payment was illegal under the laws of State Y. Under section 162(c)(1), X Corp. is precluded from deducting as a trade or business expense the $5,000 paid to A.
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